That amazing low unemployment rate

You can see why Donald Trump makes a big deal of the unemployment rate. At 3.5 percent, it's at a 50-year low. Despite some caveats, that's impressive.

But when you think about it (and thinking is what this blog is all about), the unemployment rate is the economic statistic for which the president is least able to legitimately take credit. And that's saying something, because presidents generally take too much credit, and get too much blame, for happenings in the economy.

Lucky for Trump, most people don't think about it. If they did, they would see that the president has to share that low unemployment rate with his predecessors. In fact, there's a very strong sense in which a lot more credit goes to them (including Obama) than to Trump. This is quite easy to understand.

You see, the unemployment rate is actually a cumulative statistic, in that it takes into account all employed workers in the economy in its calculation. Most of those workers got their jobs under previous presidents, not under Trump.

It's helpful to understand that the unemployment rate is defined as the percentage of unemployed workers in the labor force. The labor force is defined as all persons who are able and willing to work; that is, persons who are either employed or who want to be employed. (Persons who are not employed, and who choose to not look for a job, aren't considered to be in the labor force. Plenty of  persons are more or less voluntarily unemployed. We don't count them in the unemployment rate.)

So, the unemployment rate is defined as:

unemployed workers / labor force

This is algebraically identical to: 

unemployed workers / (employed workers + unemployed workers)

Both the numerator and denominator affect the rate. A small numerator results in a lower rate, as does a large denominator.

For present purposes, we will assume that the denominator remains constant, although it actually doesn't due to factors such as population growth and the participation rate, which we will ignore here for simplicity.

With a constant denominator (which is to say a constant labor force), unemployed workers and employed workers change by the same amount in opposite directions as jobs are lost or created in the economy.

So the effort to reduce the unemployment rate consists of transitioning unemployed workers to employed workers, and minimizing the transition of employed workers to unemployed workers.

Which is to say, maximizing employed workers.

But notice that employed workers is a cumulative quantity. Some of those employed workers in the unemployment rate calculation hold jobs created under the current president. But many more of them hold jobs created under previous presidents.

And for purposes of calculating the unemployment rate, all jobs count equally. It doesn't matter a bit in what order they occurred.

Trump wants all the credit for the low unemployment rate, but in fact the rate contains far more employed workers (the quantity we want to maximize) holding jobs created under Obama than under Trump.

Obama created more than 15 million jobs since the last month of negative jobs growth of his presidency, which was September 2010. Combining jobs created and jobs lost, Obama created a net 11.6 million jobs over his presidency.

(Don't forget: At the time of Obama's first inauguration the economy had been in recession for 14 months, and was losing almost 800,000 jobs per month. So Obama began in a deep ditch. On the other hand, many of those lost jobs would presumably come back as the economy healed. A partisan can spin this in any direction he wants.)

Trump has created around 6.6 million jobs so far. Because he inherited an economy that had been expanding for many years when he took office, and because that expansion has continued, Trump has never experienced a month of negative job growth.

The total size of the labor force is presently 164 million. Total employed workers is far in excess of 150 million. The jobs created by Trump plus the jobs created by Obama account for a small fraction (a bit over 10 percent) of employed workers. All of those 150+ million workers figure into the unemployment rate calculation. So with respect to the unemployment rate, the contribution of employed workers by any one president is quite small. Trump has no special claim on the present historically low rate. He just happens to be in office toward the end (we presume) of a historically long economic expansion that as of this writing has gone on for an impressive 125 months. The large majority of those months were under his predecessor.

You can also intuit the cumulative nature of the unemployment rate by examining it graphically, over time.

It's interesting that Trump wants to hang his hat on the low unemployment rate, even though we've just seen that's not really appropriate. Surely it would be fine for him to take some credit for continuing the rate's long term decline at a pace almost as good as what he inherited, but that's not what he's doing. In the past I have said, somewhat facetiously, that we can give Trump credit for not screwing up Obama's economy. Though that's a deliberate poke at Trump, there's a lot of truth to it.

Although presidents claim too much credit, and get too much blame, if a president were to rightly want some credit on the employment front, perhaps it ought to be in the monthly jobs creation data. That, at least, happens entirely on his watch.

Alas, when we look at monthly jobs data, Trump substantially under-performs his predecessor. Over his 34 full months in office, Trump created an average of 193,000 jobs per month. And that includes the most recent, and unexpectedly strong, report of 266,000 jobs created in November. Over his final 34 months in office, Obama averaged 227,000 jobs created per month, which betters Trump by a whopping 34,000 jobs each and every month. I have previously shown that at no point in his presidency did Trump ever match Obama in jobs creation. And as I've said many times, you can do your own analysis, and check mine, by going to the authoritative Bureau of Labor Statistics site where the data is compiled. Look for the table near the bottom of the page.

Even in this we must be fair. Jobs are harder to come by the closer the economy is to full employment (which is also why the unemployment rate curve flattens toward the end). So we'd expect the pace of job creation to slow late in an economic expansion. But the difference between the two presidents in the jobs creation data was significant even early in the Trump presidency compared to late in the Obama presidency. (In other words, to similar, adjacent periods in the economy.) We can be charitable and say on balance Trump has done just fine, but that's not what he claims for himself. Rather, Trump says he's launched an economic miracle, the likes of which has never been seen, and that it's his unique accomplishment. Which is complete nonsense. Even GDP growth under Trump has been quite modest, and that's despite a large tax cut.

Finally, don't forget: During the presidential election, Trump was scathing in his criticism of Obama's economic performance and jobs creation, which Trump has been unable to match. All he can really do is claim the very low unemployment rate for himself, because none his other economics statistics are all that remarkable. But as we've seen, it isn't his to claim.  Even so, as long as most people don't understand why, he'll probably keep getting away with it.


Copyright (C) 2019 James Michael Brennan, All Rights Reserved

The latest from Does It Hurt To Think? is here.

What the jobs report says about us

Chris Hayes made a humorous and insightful observation on his Friday-night show. It is this: Persons on the left agree that the economy created 266,000 jobs last month.

That's the unexpectedly strong number reported by the Bureau of Labor Statistics on Friday, showing that job growth continues, even despite other indicators of a slowing economy. Nobody was expecting anything like a net loss of jobs, but the latest report was far stronger than anybody anticipated, surprising most experts. The previous two months were revised upward as well. The unemployment rate fell to 3.5 percent, a 50-year low. (More on that in another post.)

At 125 months, this is the longest economic expansion in U.S. history. The most recent month of negative job growth occurred way back in September 2010 in the aftermath of the financial crisis, more than 9 years ago. Amazing.

But what is so insightful about noting that the left agrees that the latest jobs report is correct? Which I found mildly amusing, in this ironic sense: Why wouldn't the left agree? After all, the BLS, which is authoritative on these matters, is staffed with competent career professionals who work diligently to collect, analyze, and report the data. If they say it is so, then we can implicitly agree without a second thought. So of course we do.

The insight was in Hayes's contrasting Democrats' implicit acceptance of BLS expertise and reporting with Republicans' sometimes selective dismissal of it. It's yet another demonstration of how the left and right gauge reality differently. The contrast is quite instructive.

It's dismal to realize that minds operate differently, in ways that are unsettling, across the left-right divide. The left relies on facts, expertise, learning, empiricism. The right relies on ... other things. Things like unhinged conspiracy theories, ideological and partisan fantasies, and alternative realities. I like to say to a friend on the right that, whereas I know things, he just knows things. The left values critical thinking; the right, not so much. There really is a fundamental difference between how the two sides approach reality. All kinds of examples could be provided.

We on the left are far less conspiratorial or irrationally cynical, and see no reason to doubt the BLS's jobs report, even if it's surprising. Hayes pointed out how Politico's chief economics correspondent, Ben White, tweeted this after the report: "Today I'm thankful I don't see the kind BLS truthers that always seemed to pop up when Obama had good jobs numbers."

Hayes remembers how it was under Obama: "Any time there were good jobs numbers a bunch of conservatives—a bunch of them—would just start yelling that they're cooking the books!" Conservatives were convinced there was a conspiracy inside the government to make Obama look good when the economy was actually bad.

Jack Welch (for chrissake!), the hallowed former CEO of General Electric, tweeted this in 2012: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers"

Welch's tweet came a month before the presidential election. Welch implied that Obama rigged the jobs report to enhance his prospects for reelection.

Which is just bonkers. No, really: It's batshit crazy. It's the canonical example I use to demonstrate what I mean by a shocking absence of critical thinking on the right, and a willingness to believe anything conspiratorial, no matter how ludicrous.

For gawdsake, Jack, think! Obama couldn't get away with rigging the numbers even if he wanted to. There would be no way to surreptitiously orchestrate such a move inside the BLS, where all the work of producing the report is done by career professionals (some of whom are of course Republicans), not political appointees. If such a thing were attempted, whistleblowers would scurry out of the woodwork like crazed cockroaches. The whole plot would blow up in the face of any president who attempted it. Pursuing such a boneheaded scheme, especially on the eve of an election, would be a sure road to electoral demise. It's hard to imagine anything stupider. And listen: It oughtn't be necessary to even explain this to anybody who isn't a child or a dolt.

From where, one wonders, comes the pathology that has infected right-wing brains? The variety of conspiracy theories in prominent circulation on the right over the past dozen years far exceeds the number of strains of flu virus over the same period. Jack Welch ran one of the biggest and most complicated corporations on the planet (perhaps he cooked GE's books?), but somehow couldn't reason his way to an understanding about how a professional agency such as the BLS operates. What the heck is going on? I long ago gave up on assuming that education or high accomplishment immunizes a right winger from such stupidity.

It wasn't just Jack Welch. Chris Hayes reminds us that bizarre jobs trutherism was widespread on the right when Barack Obama was president, including in the conservative media. In 2014 Fox's Sean Hannity called the unemployment rate a lie. But nobody peddled this nonsense more devotedly than Donald Trump himself, who has personally curated an immense portfolio of crazy conspiracy theories that ought to have rendered him unelectable. On the campaign trail and in incessant tweets, Trump repeatedly derided the jobs numbers as phony. Here's a representative collection of Trump quotes, which you can hear by clicking on this link:

TRUMP: The jobs numbers that come back are total nonsense ... they compile the numbers so that politicians look good.

TRUMP: We're losing jobs, we have a phony jobs number.

TRUMP: You hear about that phony jobs number where it's 5 percent ... 5 percent ... it's not 5 percent! ... don't believe the 5 percent stuff ... we don't have ... it's 25 percent.

TRUMP: Our real unemployment rate is probably 30 percent.

TRUMP: I actually think it could be as high as 32, 35 percent.

TRUMP: As high as 35, in fact I even heard recently 42 percent.

[The continual ratcheting up of made-up statistics is a trademark Trumpism and the telltale sign of a liar. So is the gratuitous precision. I assure you Trump never heard from any expert that the true unemployment rate was 42 percent.]

TRUMP: It's a phony set of numbers, they cook the books.

Through all Trump's raving lunacy, the unemployment rate continued to steadily decline. Once Trump had been elected and duly sworn in, everything was suddenly different. Trump's first monthly jobs report was good enough for his press secretary, Sean Spicer, to crow about from the podium. And unlike under Obama, these numbers were real. Which creates some significant explanatory problems, does it not? Your average right-winger has no idea what I just asked.

SEAN SPICER: Yeah, I talked to the president prior to this, and he said to quote him very clearly ... they may have been phony in the past, but it's very real now.

Spicer was grinning when he said it. Spinning some humor gets around the need to explain the absurdity of how the unemployment rate suddenly went from, oh, 42 percent or so, to well under 5 percent. Just like that. But the ridiculous juxtaposition wasn't entirely a joke, either. The president would soon and repeatedly tell us that we were in the midst of a never-seen economic miracle and expect us to believe it, even as he created fewer jobs than his predecessor from the outset, and throughout his first term.

I often display an official graph (the one below is from the St. Louis branch of the Federal Reserve) of the unemployment rate, from its peak a decade ago all the way to present. When I do, I'm implicitly asking my graph-literate reader to take a gander and then tell me at what point the Trump magic kicked in. (Hint: It wasn't on inauguration day, which I've marked on the graph.) The assumption is that any sentient individual has enough critical thinking ability to see that there is no Trump effect anywhere to be found; otherwise it would show up on the graph. The unemployment rate has declined steadily going all the way back to 2009. The decline continued at approximately the same pace (actually a little more slowly, which you can see in the slight but discernible flattening of the curve) under Trump.

Source: St. Louis Fed
(Click on graph for a larger view)

Two other things are obvious from the graph. First, anybody who thinks we went from 42 (or 35 or 32 or 30 or 25) percent unemployment during the election season to less than 5 percent in Trump's first jobs report has some explaining to do about how that was accomplished, and about the true shape of the unemployment rate curve over that time. (Let's see your graph, Don.) Second, Jack Welch should be embarrassed. I wonder if he is.

Our deeper exploration in this ostensible look at the jobs data regards how persons on the left and the right gauge reality differently. Right wingers advanced absurd conspiracy theories about authoritative jobs reports issued by the BLS under Obama. By contrast, we on the left happily acknowledge the BLS's latest report of 266,000 jobs created in November under President Trump, because we understand that in the United States such reports are not susceptible to manipulation by presidents, and we know what are and are not authoritative sources of information. In other words, we on the left have a healthy understanding of what's real that is quite obviously lacking on the right.

That's the larger point that Chris Hayes was making. For my part, I would ask you to consider as well the great damage Donald Trump does to the public trust when he peddles his absurdity. There's no knowing for sure whether he himself truly believes all the nonsense he spouts (there's some reason to think he actually does), or is manipulative and self-serving in a deeply cynical way, or is just bullshitting. Whatever the true explanation, the mindless rabble that constitutes Trump's base has no capacity to discern what's real, and so the damage Trump does in undermining our commonly-held institutions (such as government) is immense and, frankly, unforgivable.

The problem is far greater than reckoning the unemployment rate. Hayes segues from conservative derangement on jobs to conservative derangement on who attacked the 2016 election. Spoiler alert: It wasn't Ukraine.

We on the left understand that the 17 intelligence agencies of the United States have concluded unanimously and with high confidence that it was Russia, not Ukraine, that attacked our election, while the only evidence advanced by Ukraine conspiracy mongers is risible. Those agencies still conclude it, even as they now serve a president who seems to not believe them, but does believe Vladimir Putin. (Can you even imagine that?) A surprising amount of the evidence is in the public domain, and we have seen that it is quite specific. (There's a lot of it, in considerable detail, in the Mueller report.)

We have also observed that current and recent national security officials (such as Fiona Hill, the NSC's top Russia expert, who worked for John Bolton and testified in the impeachment inquiry) have said that framing Ukraine is part of a disinformation operation conducted by Russian intelligence. U.S. Senators have received classified briefings to that effect. Despite all that, the right (including some Republican senators) seems eager to go down the Ukraine rabbit hole nonetheless, in defense of the president. The president is already down there.

That's the same guy who claimed Barack Obama wasn't born in the U.S. Who said Ted Cruz's father was involved in the Kennedy assassination. Who said the National Enquirer is a respected news organization. Who admires Alex Jones (the country's most accomplished conspiracy monger) of InfoWars, and even went on Jones's show. It was Jones who peddled "Pizzagate," and who claimed the Sandy Hook massacres of twenty young children never happened, and much more (to borrow Don McGahn's term) "crazy shit." Who (back to Trump) said he "saw" thousands of New Jersey Muslims celebrating when the World Trade Center came down. None of it is true. The Washington Post says Trump has made over 13,000 false or misleading claims since becoming president. How can a great country survive such a president, or a citizenry that would endure him?

Chris Hayes laments the existence of a conservative "ecosystem that has been totally detached from reality." He's correct. There is no party but the Republican one that would tolerate an ignorant and buffoonish confabulator like Trump as its head. Surely that's because the left has a reasonably sound grasp of reality, and some intellectual integrity to go with it; the right frequently has neither. Psychologists and neuroscientists are working to understand why that is so.

It's the right that denies climate change, despite overwhelming scientific consensus, and readily accessible evidence both that it is happening and that it will cause immense harm. It's the right that claims tax cuts pay for themselves, despite economists saying otherwise, plus the weight of evidence which shows unambiguously that they do not. Republicans live in an imaginary world of their own making. Democrats live in the real world, as they determine it to be by principled empirical inquiry—the only kind of inquiry that can explicate objective truth. (It ought to be obvious, but isn't on the right, that objective truth is the only truth that at least in principle can be held in common by all of society. Indeed, by all of humanity.) Republicans construct reality to fit their ideological preferences. Democrats, who have no problem accepting the latest jobs report, understand that reality is what we find when we examine evidence, and reason about it.

---

Postscript: I should say that I don't normally piggyback so overtly on cable news programs. But Chris Hayes riffs on a theme that has long fascinated (and disturbed) me. I've obsessed on it in private correspondence and public essays. After all, the name of this blog is Does It Hurt To Think? My blog profile says I'm interested in "the nature of truth," which is another way of referring to how people understand and communicate what is real. I have long believed that critical thinking is the only thing that can save us, and its stunning absence on the right bodes ill for our common future. The Republican Party is dangerous not so much because we have honest differences over policy, but because we have different conceptions of reality. There being (by definition) only one reality, one of us must be wrong.

Copyright (C) 2019 James Michael Brennan, All Rights Reserved

The latest from Does It Hurt To Think? is here.